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In developing a compensatory share option plan, a company's objective is
- to motivate executives and employees to manage the company in a way that increases stock price.
- to decrease employee turnover.
- to enhance compensation packages without having to expend cash.
- to do all of these options.
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- Tutorial Questions Explain to John, your mentor, the primary goal of the organization? Your manager is requesting you to provide an explanation to the question. Would the role of a financial manager be likely to increase or decrease in importance if the rate of inflation increased? What is the difference between stock price maximization and profit maximization? What are the three principal forms of business organization? What are the advantages and disadvantages of each? What mechanisms exist to influence managers to act in shareholders’ best interests? What is an agency relationship? What agency relationships exist within a corporation? What are financial intermediaries, and what economic functions do they perform? How does an efficient capital market help to reduce the prices of goods and services? What is the term structure of interest rates? What is a yield curve? How should users and savers of…their stock's intrinsic value and then Managers should try to communicate effectively with value to be high and the actual stock price to remain close to the intrinsic value over That will cause the intrinsic time. on O a. maximize; the CEO O b. minimize; stockholders O c. maximize; stockholders O d. minimize; the CEOExplain how a firm might use stock options in order to incentivise a manager to work in the shareholders’ best interests.
- CEO compensation design is effective in controlling the behavior in their decision making. How a compensation package could possibly work in adjusting a CEO’s risk taking behavior (in investments) and in balancing long-term vs. short term interests of a company?A friend who knows you study accounting approaches you to discuss share market investment strategies. They believe deciding which shares to invest in should be based solely on understanding the business model and reading analyst forecasts regarding the company. Is this strategy sound? Why or why not? What other approaches or tools would you recommend to assist in making investment decisions? Discuss.The dividend policy of a company is a key focus for potential investors. This is because dividends are the main contribution to the assumed investment objective. Hence, it is important that management monitor and review the various factors that influence the company's dividend policy. Critically analyse this statement.
- Advise the directors of Y Limited whether or not the company should continue the strategy inthe long run. Justify your answer.Give typing answer with explanation and conclusion The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to a. Maximize its expected EPS. b. Minimize the chances of losses. c. Maximize the stock price on a specific target date. d. Maximize its expected total corporate income. e. Maximize the stock price per share over the long run, which is the stock's intrinsic value.Which of the following is the primary goal of a firm? Select one: O a. maximize stockholder wealth O b. maximize dividend payments Oc minimize expenses O d. satisfaction of suppliers
- 1. The ________________________ determines how much the stock is worth.2. _________________ is the study of applying specific value to things we own, services we use and decisions we make.3. The process of monitoring managers and aligning their incentives with shareholder goals is known as_______________________. 4. An _________________ is a person who performs an independent assessment of the fairness of a firm’s financial statements.5. The opportunity to buy stock at a fixed price over a specific period of time is known as an _____________________.Firms must provide the right incentives if they are to get -Select-shareholderscreditorsmanagersItem 1 to focus on long-run value maximization. Conflicts exist between managers and stockholders and between stockholders (represented by managers) and -Select-employeesdebtholderscustomersItem 2 . Managers' personal goals may compete with shareholder wealth maximization. However, managers can be motivated to act in their stockholders' best interests through (1) reasonable -Select-vacationcompensationperquisiteItem 3 packages, (2) firing of underperforming managers, and (3) the threat of hostile takeovers. If a firm's stock is undervalued, corporate raiders will see it as a bargain and will attempt to capture the firm in a hostile takeover.-Select-StockholdersBondholdersItem 4 generally receive fixed payments regardless of how well the firm does, while -Select-stockholdersbondholdersItem 5 earn higher returns when the firm's earnings are higher. Investments in -Select-riskysafeItem…The goal of a financial manager is to Multiple Choice O O O O Maximize profit Maximize ROE (DuPont Identity) Maximize shareholder wealth Minimize risk